The impact of education technology in Indonesia

Indonesia is potentially entering a demographic sweet spot, as around half of its population is currently under the age of 30. With this in mind, President Joko Widodo, better known as President Jokowi, has repeatedly stressed the need for the country to overhaul its education system in order to prepare the future workforce to compete in an information-, technology- and creativity-driven global marketplace.

While currently on hold due to the Covid-19 pandemic, the construction of a new capital city powered by smart technologies in East Kalimantan will further drive local demand for skilled engineers capable of spearheading the government’s Making Indonesia 4.0 initiative, a vision designed to prepare the country for the increasing automation of industry.

Policy & Oversight

Following the Asian financial crisis of 1997-98, President Suharto resigned from office. In his place came Bacharuddin Jusuf Habibie, whose 2001 “big bang” decentralisation initiative saw the centralised political authority disperse power to provincial and regional governments. This new political autonomy afforded local governments considerable control over education policy and management.

Higher education, however, remained under the central control of the Directorate General of Higher Education (DIKTI), an arm of the Ministry of Education and Culture. Following President Jokowi’s inauguration for his first term in 2014, DIKTI merged with the Ministry of Research and Technology to create the Ministry of Research, Technology and Higher Education.

In 2002 a change to constitutional law stipulated that 20% of the annual state budget be allocated to education. This target has been achieved each year since 2009. Government spending on education in 2019 accounted for 3.5% of GDP, and 2020 will see a further $35.5bn put into the education system.

The School Operational Assistance programme is an education grants scheme established in 2005 to offer additional financial support to both primary and junior secondary schools, with the level of funding that institutions receive dictated by the size of their student population. Even prior to 2002 primary school enrolment was high, and it has remained so, with more than 29m children registered in Indonesia’s primary education system in 2018. Enrolment in secondary education has increased markedly, rising from 15m in 2002 to close to 25m in 2018. This positive increase in enrolment, however, has not translated into higher levels of achievement, leading the president to call for the reconfiguration Indonesia’s education system.

Student development levels rank in the bottom 10 globally, according to the 2018 Programme for International Student Assessment results. Decentralisation complicates matters, since the absence of a standardised national curriculum makes it difficult to ensure delivery of a uniform standard of education and also exacerbates regional disparities. While authority and funding has been devolved – around two-thirds of the annual education budget is distributed to regional authorities – the best schools and higher education institutions are almost exclusively on the island of Java.

In December 2019 the government announced the creation of the National Talent Management body, a public agency designed to gather data on Indonesia’s brightest individuals. Indeed, tracking student ability and progress underlies several initiatives aimed at facilitating student attainment in order to address the country’s skills deficit (see analysis). Meanwhile, the use of digital technology is becoming increasingly interwoven with efforts to enhance teaching methodologies and access to high-quality education and training.

Structure

The duration of free, compulsory schooling in Indonesia was increased from nine years to 12 in 2013, which again boosted school enrolment rates as well as the number of active teachers and schools. For the 2019/20 school year there were around 2m teachers in Indonesia spread across 149,000 primary schools, 40,600 lower-secondary, 14,000 upper-secondary and 14,300 secondary vocational schools. Children spend the first six years in primary education, while the following three are spent in junior secondary school. This nine-year period is classified as basic education. The remaining three years constitute higher secondary education and can take either the form of general academic secondary education or vocational secondary education (see analysis). Beyond the obligatory 12 years, there is the option to pursue higher education in one of the country’s universities.

At every level of this general structure there exists various modes of education. The majority of Indonesia’s schools are publicly owned, yet private institutions have a significant presence, constituting 48% of all schools, educating 31% of all students and employing 38% of all teachers in the 2019/20 school year. Religious schools, governed by the Ministry of Religious Affairs, are also prominent, dominating private compulsory education. The vast majority follow Islamic curricula, reflecting Indonesia’s religious orientation. In spite of their private status, these schools qualify for public funding due to their affiliations with Islamic organisations.

In the above context, public, non-sectarian schools are perceived to offer the best education. However, international schools are also privately owned and, due to their foreign accreditation, teach international-standard curricula, offering the highest quality of education in Indonesia. The high cost of attending these institutions traditionally made them the reserve of wealthy Indonesians and foreigners; yet, since 2014, the former have not been permitted to attend entirely foreign-owned schools. All Indonesians must now engage in a minimum level of Indonesian curriculum to ensure “moral strengthening”, and can instead attend joint cooperation schools, which are domestically owned institutions with foreign accreditation, teaching and Indonesian-international curriculum.

Shifting Dynamics

Politics and education in Indonesia are in some instances intertwined, and it is reported that some head teachers may at times be appointed for political reasons at the local level, rather than based on the merit of their qualifications and relevant experience. Lack of transparency has historically also been an issue in some cases, with reports including bills for unnecessary extracurricular fees and the misallocation of school budgets. President Jokowi showed intent to change the dynamics of the education system early in his tenure, and in 2015 four head teachers were removed from their positions due to issues regarding lack of transparency.

The announcement of the president’s revamped second-term cabinet saw a number of tech-oriented entrepreneurs appointed as the heads of various ministries. Nadiem Makarim, the new minister of education and culture, is the founder and former CEO of Gojek, the first Indonesian start-up to achieve unicorn status, when it reached a valuation of $1bn in August 2016 (see ICT chapter). One of Makarim’s greatest challenges will be replacing the complex bureaucracy entrenched within Indonesia’s school and higher education frameworks with a progressive, student-centric approach to teaching, learning and research that will enable the country to fully capitalise on the advantages presented by its young population. Makarim has been quick to pinpoint outdated, mechanical teaching methods that are based on rote learning rather than problem solving and creative, critical thought – fundamental requirements of the modern-day workplace.

In December 2019 Makarim announced his reform package, Freedom to Learn, which contains four fundamental changes to Indonesia’s education policies. Two of these involve the reshaping of school examination and assessment procedures (see analysis), while the other two stipulate a reduction in teachers’ administrative duties and changes to the current school zoning and admissions framework. In regard to the latter, the proportion of places reserved for pupils who live within a school’s catchment area was lowered from 80% to 50%, while the proportion reserved for high academic achievers was doubled to 30%.

Raising Teacher Quality

The Teacher Law, passed in 2005, stipulated that all teachers in Indonesia must complete a bachelor’s degree and pass a standardised competency exam. Upon meeting these criteria teachers receive a professional allowance, which effectively doubles their pay. This has resulted in about 60% of the overall state education budget being allocated to teacher salaries. While teachers have reported increased student engagement due to better teaching methods, the Teacher Law has not improved overall student attainment and achievement in line with the costs incurred in its implementation. Indeed, in spite of the law’s constituent reforms, the 2015 compulsory teachers test suggests that teaching quality has not yet improved sufficiently. The examination, issued by the central government, suggested that over 50% of participants lacked basic competencies pertaining to subject knowledge and pedagogical capabilities.

High-quality teaching and professional accountability will be necessary for programmes, proposals and initiatives implemented across Indonesia’s education system to be successful. Ensuring this is achieved calls for a multi-faceted approach involving the modification of financial incentives, career-long teacher training schemes and a shift in general teaching style. Given Makarim’s aforementioned criticism of prevailing teaching methods, many had expected his first reform package to more aggressively confront the issue. Speaking to local media in late 2019 he said that teachers are currently so heavily burdened with administrative duties that they do not have time or space to reflect on their practice in order to develop in their roles. By freeing them up and allowing them to apply their own creativity and problem-solving capabilities, it will become easier to gauge the country’s actual pedagogical capacity.

Multilateral Assistance

The World Bank is assisting Indonesia in meeting its education goals through several initiatives aimed at enhancing teaching and learning outcomes by creating more cohesive, efficient and modern methodologies. One such initiative is the Improving Dimensions of Teaching, Education Management and Learning Environment (ID-TEMAN) programme, which is part-funded by the Australian government. Through ID-TEMAN, collaborating bodies aim to provide continuous professional development and training to Indonesia’s in-service teachers.

In addition, the Kiat Guru programme, a regional World Bank pilot initiative that began in 2019, enables teachers to use a digital application to tailor tests for students and streamline administrative procedures. Once configured, results from tests taken through the application constitute the basis of community discussion between teachers, parents and school leaders. Teacher performance and attendance is also monitored on the digital platform, with the aim of improving professional standards and accountability. Teacher absenteeism – though slightly improved – is a long-standing problem in Indonesia, particularly in rural communities. This is attributed in part to low salaries, which lead many teachers to work more than one job. The synergy between the aforementioned schemes and the reforms Makarim has instituted is positive, suggesting that he is prepared to embed the substance of such initiatives in his overarching education policies. However, securing the level of funding and physical support required to comprehensively implement those initiatives and eliminate the root causes of the issues they face remains a major challenge for the government.

Edtech

Makarim is Indonesia’s youngest-ever education minister and is already a household name, particularly among millennials, due to his background as a tech entrepreneur. In 2010 he launched Gojek, which graduated from unicorn to decacorn status in 2019, when it surpassed the $10bn valuation threshold as part of its journey from ride-hailing to multi-service mobile application. Makarim’s intimate knowledge of digital markets should assist the country in harnessing and leveraging educational technology (edtech) in order to modernise Indonesian education and its constituent institutions. Global edtech revenues for 2018 were an estimated $14.4bn, and, due in part to the expected increase in adoption in emerging economies, that figure is predicted to rise to over $34bn by 2024. Among the benefits of digital education platforms are the ability to create personalised, interactive learning pathways; the chance to establish online forums for students and teachers; and the opportunity to leverage the internet to promote research, analysis and cultural awareness – as well as technical know-how – from a young age.

In 2014 two Indonesian entrepreneurs, Adamas Belva and Iman Usman, launched Ruangguru, an edtech platform that provides interactive, personalised learning programmes and examination preparation support. In total, Ruangguru caters for approximately 15m students and 300,000 teachers over 100 subjects.

The platform enjoyed significant growth in 2015, which the pair attributes to robust demand for high-quality education within the country. As a result of its success, the company secured $150m in additional funding in December of that year. The majority of Indonesia’s regional governments have recruited Belva and Usman to implement learning management platforms in schools, giving a clear indication that calls from the president and his new education minister to modernise the education sector are being received. More recently, Ruangguru helped to fill educational gaps created by the global Covid-19 pandemic, which led to national exams being cancelled for more than 8m high school students in the first half of 2020. In March the firm launched the Ruangguru Online School Programme, which allowed users of all grades to subscribe for free and participate in virtual classes delivered by the platform’s master teachers every weekday from 8.00am until 12.00pm. Thanks to a partnership struck with the country’s biggest cellular operator, Telkomsel, students were offered a free 30-GB internet package to allow them to study online without incurring any costs.

Ruangguru and other Indonesian edtech firms such as Zenius and Quipper hosted over 1m students in the first two months of Covid-19-related social distancing. Going forward, the disruptive potential of tech may guide, rather than support, the future of Indonesian education. Further investment in young innovators would not only help develop the nation’s talent pool but could also convince its brightest young adults to remain in the country to pursue their professional ambitions.

Vocational Platforms

Jakarta-based tech start-up ProSpark, an online vocational training company, works closely with its corporate clients to identify gaps in the skills of their human capital – both as a holistic workforce and on an individual basis – and then create bespoke training packages to address the shortfall. “A real lack of soft skills is apparent,” Alfa Bumhira, CFO and co-founder at ProSpark, told OBG. “But Indonesia is a hungry market with a huge demand for high-quality education and training. If a risk-taking culture based on creativity and constructive criticism can be cultivated, this will eventually feed into both the education system and the workplace.”

With the expansion of vocational training a key priority of the Jokowi administration (see analysis), private-sector-led online vocational platforms could play a vital role in filling skills gaps and solving physical infrastructure shortfalls for the education sector in the years to come. If this potential were to be harnessed through greater public-private collaboration, the accelerated skills development called for by President Jokowi would become more achievable, creating a cyclical dynamic whereby successful entrepreneurs guide the development of those who aspire to tread a similar path.

Universities

Within the higher education segment, just three of Indonesia’s 3000 higher education institutions (HEIs) placed in the top 500 in the 2019 Quacquarelli Symonds World University Rankings, with no Indonesian HEIs in the top 200. In the Times Higher Education World University rankings, another global benchmark, just one Indonesian tertiary institution – the University of Indonesia – made the top 1000 in 2020. Too few qualified lecturers, outdated teaching methods and a student base that is not appropriately prepared for the rigours of higher education are cited as key factors behind the current lack of quality.

This poses a notable challenge for President Jokowi’s aims of establishing a future-ready workforce. “Although digitalisation is pushing people to learn new skills, it is also disrupting the job market at a rapid pace,” Munin Widardjo, president director of Ikonsultan Inovatama, told OBG. “In response, the education system must be updated, as there is a big difference between what the universities teach and what employers need.” Although foreign participation in higher education was previously limited to non-profit institutions, the February 2020 ratification of the Australia-Indonesia Comprehensive Economic Partnership Agreement paved the way for Monash University to become the first fully foreign-owned-and-operated university to be granted approval to establish a campus in Indonesia. Monash initially planned to begin offering short executive courses by the end of the year, before its first intake of master’s degree students in 2021; however, the nationwide closure of schools in response to the Covid-19 pandemic is likely to delay these plans.

Officials from Monash have also stated a willingness to enter into research and education partnerships with local universities. At the time of the announcement, the Indonesian government revealed that full ownership and operation was being granted only to Australian universities as part of the established trade agreement; however, Makarim said Monash’s investment would be the first of many partnerships with foreign universities aimed at strengthening the education system.

The entry of Monash University could act as a further catalyst of progress and have significant benefits for the Indonesian education system and workforce, potentially reshaping the education landscape by expanding choice and raising standards. It is hoped that the establishment’s presence will prove both a positive disruption in the higher education sector, and an attractive proposition for high-achieving Indonesian students who may otherwise leave Indonesia to study abroad. Moreover, there is potential scope for collaboration with institutions from Singapore (see analysis), which could enhance measures to advance Indonesia’s human capital, in particular.

Outlook 

It remains to be seen whether the government’s seemingly favourable position regarding foreign participation in Indonesian education will translate into more meaningful actions that attract investment. Such a vast and untapped market would likely prove appealing to investors presented with attractive legislative framework. Major financing will be required to train teachers and promote teaching as a viable profession across the country, particularly in its underserved regions, and ultimately advance the country’s human capital to meet the ever-evolving demands of the workplace. Strategic partnerships aimed at creating more appropriately skilled professionals and tradespeople should prove fruitful, but time will tell whether such selective endeavours are sufficient. That said, positive changes are afoot, and both President Jokowi and Makarim have shown that they are prepared to challenge the status quo in their pursuit of a vibrant, progressive Indonesia driven by a dynamic workforce.

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The Report: Indonesia 2020

Education & Human Capital chapter from The Report: Indonesia 2020

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